Takaichi adviser signals no need for reflationist BOJ picks as Japan exits deflation, March hike seen unlikely.
Summary:
PM adviser Honda says BOJ board picks need not be reflationists
Japan described as having exited deflation
BOJ may have scope to hike this year
March hike seen as unlikely
Board nominations due as early as Feb 25
Markets watching for Takaichi’s policy stance
An economic adviser to Prime Minister Sanae Takaichi has played down the need for Tokyo to appoint outspoken reflationists to upcoming vacancies on the Bank of Japan board, signalling a potentially more pragmatic stance toward monetary policy as Japan transitions out of its deflationary era.
Etsuro Honda, a long-time ally of Takaichi and former aide to late Prime Minister Shinzo Abe, said the government does not necessarily need to select board members committed to aggressive monetary easing. He argued that Japan’s economic conditions have shifted materially, with the country now out of deflation and entering a new phase focused on sustainable growth.
Honda said the Bank of Japan may see scope to raise interest rates later this year as inflation and bond yields suggest continued normalisation. However, he indicated that a move in March would likely be premature, given the need to assess the impact of December’s rate hike and broader financial conditions.
Two of the BOJ’s nine board seats are due to open this year, including that of Asahi Noguchi at the end of March and Junko Nakagawa in June. The government is expected to submit a nominee to parliament as early as February 25. The selections will require approval from both chambers and are widely viewed as a test of how closely Takaichi intends to align herself with or influence central bank policy.
Under Governor Kazuo Ueda, the BOJ exited its ultra-loose stimulus framework in 2024 and has since lifted rates to 0.75%, reflecting confidence that inflation is moving sustainably toward the 2% target.
Honda’s remarks suggest the administration may allow gradual policy tightening to proceed, rather than attempt to reinstall a strongly dovish bias on the board.
